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No-deal tariff plan is bad news for North’s businesses

Proposal would create increased risk of smuggling and other illegal activity

Thu, Mar 14, 2019, 02:50

The UK government presented the tariffs plan as temporary and says that it would want to enter urgent discussions with the EU and Irish governments after a no-deal on the Border issue. Photograph: Liam McBurney/PA Wire

The announcement of the no-deal tariff plan by the UK government on Wednesday was not good news for businesses in the North. To avoid implementing physical border checks, the British government said goods could enter the North from the Republic tariff free. This opens up new competition for businesses in the North, particularly in sectors where tariffs are normally high, like areas of the food industry. On the flip side, Northern producers will face tariffs selling into the EU market, including the Republic.

As Northern business leaders pointed out, the backstop plan, voted down in the House of Commons, would have given them unique, tariff-free access to both the UK and EU markets. Instead, a no-deal exit would leave them facing barriers selling into the EU and with the possibility of some additional checks on goods crossing the Irish Sea – and at company premises. All the more remarkable, then, that the DUP opposed the withdrawal agreement and supported a no-deal exit in the two House of Commons votes.

The UK government presents the plan as temporary and says that it would want to enter urgent discussions with the EU and Irish governments after a no-deal on the Border issue. But, as with the backstop plan in the withdrawal agreement, the issue would be how else to avoid a hard Border?

Arguably, the plan could fall foul of World Trade Organisation (WTO) rules which oblige countries to treat imports coming from all different countries the same. However, the WTO complaints process takes a long time to reach any conclusion.

The more pressing issue is likely to be smuggling and other illegal activity. An open border between two different regimes is an invitation for smuggling – and this is a key point, too, for the Republic’s government in considering its response to a no-deal Brexit. A certain level of smuggling takes place over the Border in any case – and is subject to police action. But the UK’s no-deal plans would move this to another level entirely. It simply does not look sustainable.

A man with a profound understanding of how money is made and lost, Kerry-born economist Richard Cantillon (1680s-1734) is a fitting namesake for this long-running column. Since 2009, Cantillon delivers succinct business comment on the stories behind the news.

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